The Asymmetrical Risk is the Thing

This is where the wealth is made

Don’t look at the charts. Just stop. Close the apps, walk away, and forget price action.

This is hard to do right now, and I understand that. The last few days have been ugly. Bitcoin crashed. Crypto crashed. Even stocks crashed—with the Dow down 450 points on Friday and coming off its worst week since 2020.

If you’re like me, you watched most of your 2021 crypto profits evaporate over the course of this blasted month. For the record, I haven’t sold one penny of the crypto I own. Maybe that makes me a masochist, or a glutton for punishment. It probably makes me worthy of an insane asylum.

But I keep coming back to one major fact— investing in crypto is an asymmetrical risk.

That’s the key to all of this.

If you’ve never heard of that term, an asymmetrical risk is a scenario where the potential profit or return outstrips the risk taken upfront. Not every investment is an asymmetrical risk, but the ones that are—those are the investments that have the magic.

Let’s use Bitcoin as an example. Suppose you invest $1000 in Bitcoin right now, at $34,882 (the price at the time that I am writing this). That means you would receive .02754603 Bitcoin. Let’s say you did nothing else with your investment. If Bitcoin were to eventually go to zero, then you’d be out $1000. That’s the maximum you could lose. But if Bitcoin were to one day be worth $100,000, then the investment would be worth roughly $2,886, with a profit of $1,886. Imagine if Bitcoin went to $150,000, or $300,000…

Thus, the potential profit far outweighs the investment.

Asymmetrical risk doesn’t just apply to crypto. Investing in stocks, real estate, gold, and business startups are examples of this type of risk. Even the books I write are asymmetrical. If I wrote a book and it never sold one copy, then I’d only lose the time it took to write the book, and the sunk costs for edits, formatting, a book cover, and the like. But if I wrote a book and it sold a hundred thousand copies…

Once again, the potential profit has far outweighed the investment.

And with that in mind, I’m still in the game. I’m willing to ride this tidal wave and see what happens next. Things might get better, and they might get worse. That’s all part of the risk.

What do you think?

The Crypto Connection is for entertainment purposes only and is not meant to be financial advice. Please do your own research before investing in any asset class. Sara Celi is not a financial advisor, and holds several cryptocurrencies. To purchase her books on Amazon, please click here.